Lew throws down gauntlet

Woolworths Holdings' hopes of grabbing David Jones without a costly fight disintegrated on Wednesday after Solomon Lew tightened his grip on the upmarket department store by unveiling a 10 per cent stake that he will now use to threaten the deal.

It is believed Mr Lew might have his foot on a further 5 per cent of David Jones through a derivatives or stock lending agreement, which would almost give him enough votes on his own to block the takeover.

Mr Lew, the rag-trader billionaire and former chairman of Coles Myer, has 11 days before a crucial vote on the $2.2 billion takeover of David Jones by South Africa's Woolworths Holdings to spoil the proposal and possibly reveal his own plans for the nation's No.2 department store.

Woolworths is pushing ahead with its $4 cash per share bid, having received overwhelming support for the deal from its own shareholders in South Africa on Tuesday night.

But Mr Lew's securing a 9.89 per cent stake in David Jones, having in the past 20 days amassed 53.11 million shares worth around $200 million, has now thrown the prospect for Woolworths gaining full control of David Jones in doubt and put the squeeze on Woolworths and the David Jones board - which unanimously supports the offer - to get the deal over the line at a meeting on June 30 of its own shareholders.

Woolworths chief executive Ian Moir was still confident the takeover would succeed after receiving 99 per cent support from his shareholders this week to buy David Jones.

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''This is transformational for Woolworths. This will allow us to take market share from others, both in South Africa and Africa,'' Mr Moir said after the shareholder meeting in Cape Town. ''It will allow us to protect ourselves from northern hemisphere entrants coming in and will allow us to be one of the biggest department stores in the world.''

Following news of Mr Lew's seizure of nearly 10 per cent of David Jones, a spokesman for Woolworths was still backing the strength of the takeover deal.

''We note Mr Lew's shareholding. We believe our offer remains very compelling for David Jones shareholders and our offer remains recommended by the board of David Jones. We have nothing further to say at this point.''

The market is still perplexed as to Mr Lew's motives, with speculation ranging from his ambition to make his own bid for David Jones to using the stake as leverage to get Woolworths to buy him out of his minority stake in the ASX-listed Country Road, of which Woolworths is the majority owner.

Bernie Brookes, the boss of David Jones' retail arch rival Myer, was also unsure of Mr Lew's plans.

''I have no idea and to be honest it's not something that worries us because it has nothing to do with us,'' Mr Brookes told BusinessDay.

Roger Tejwani, retail analyst at South African-based Noah Capital, said there was still strong support among local investors for Woolworths to buy David Jones.

He said Mr Lew's stake in Country Road was not viewed by investors as a problem for Woolworths, but that Woolworths would probably be keen to mop up Mr Lew's stake and delist it from the ASX.